Contract4Deed Wiki

Glossary of Contract-for-Deed Terms

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Glossary of Contract-for-Deed Terms

Legal information, not legal advice. Each entry is a plain-English definition with a pointer to the full concept, federal, or case page where the doctrine — and its citation to a primary source — is developed in depth. Where a term’s controlling authority is well settled the citation is given inline; where the underlying page flags a point as needs_verification, the cell is marked ”—” rather than guessed. Last verified: 2026-06-08.

This is the at-a-glance definition layer of the wiki. Terms are alphabetical. Click the linked page for the cross-jurisdiction map, the litigated edge cases, and the operator/buyer framing. For the side-by-side state comparison tables, see the other reference pages.

How to read this glossary

  • Term — the word or phrase, with its common synonyms in italics.
  • Definition — one to three sentences, drawn from the linked page.
  • See — the canonical page for the doctrine ([[slug]]).
  • Controlling / leading authority — the statute, federal rule, or case the linked page identifies as controlling. ”—” means the linked page treats the point as varying by jurisdiction or as needs_verification; consult the page (and your state’s jurisdiction page) for the governing citation.

A

Acceleration clause

A contract term that lets the seller, on the buyer’s default, declare the entire unpaid balance immediately due — collapsing the future installment stream into one lump sum. Acceleration is almost always optional and elective, and is the doorway between cancellation/forfeiture and a suit-on-the-debt or foreclosure. See acceleration-clause. Synonyms: acceleration on default. Authority: — (turns on the contract’s own language and the state’s forfeiture-vs-foreclosure regime).

Agreement for deed / Agreement of sale

Regional names for the same instrument as a contract for deed — a present sale in which the seller retains legal title as security while the buyer pays in installments. “Agreement for deed” is the Florida/Southeastern usage; “agreement of sale” the Pennsylvania usage. See installment-land-contract.

All-inclusive deed of trust (AITD)

A wrap-around financing instrument (common in deed-of-trust states) in which the seller’s new, larger note “wraps” the still-outstanding senior loan; the buyer pays the seller on the full wrap balance and the seller services the underlying loan. See wrap-around-mortgage, underlying-mortgage-wrap. Authority: —.

Applicable Federal Rate (AFR)

The IRS-published minimum interest rate a seller-financed installment sale must charge to avoid having interest imputed by the government. The AFR changes every month; a below-AFR or no-interest contract is recharacterized so part of each payment is taxed as interest. See imputed-interest-afr. Authority: IRC §§ 483 & 1274; the AFR is set monthly by IRS revenue ruling (verify the live ruling). Companion: irc-453-installment-sale.

Assignment

The transfer of a party’s rights (and, by delegation, duties) under an existing contract for deed to a third person — which does not release the original party. Contrast novation. See novation-and-assignment. Authority: —.

B

Balloon payment

A single lump-sum installment — almost always the final one — that is materially larger than the regular payments, because the amortization schedule (or its absence) leaves a large unpaid principal balance due at maturity. Triggers special disclosure and ability-to-repay scrutiny. See balloon-payment. Authority: federal balloon/ATR overlay via truth-in-lending-cfd and dodd-frank-seller-financing; state disclosure rules vary.

Bond for deed

(1) In louisiana — a specific creature of statute, La. R.S. 9:2941–9:2947, governing installment land sales with a regulated cancellation procedure. (2) Elsewhere — a loose synonym for contract for deed / installment land contract. The two meanings are not interchangeable. See bond-for-deed. Authority: La. R.S. 9:2941 et seq. (Louisiana).

Bond for title

A Southeastern synonym for an installment land contract / contract for deed. See installment-land-contract.

C

Contract for deed (CFD)

A seller-financed real-estate sale in which the seller retains legal title as security while the buyer takes possession and equitable title and pays the price in installments, receiving a deed only after the price (or a stipulated portion) is paid. The umbrella instrument this wiki is about. Synonyms: installment land contract, land contract, bond for deed, agreement for deed, agreement of sale, real estate contract. See installment-land-contract, equitable-title.

D

Dealer disposition (vs. investor)

A sale of property held “primarily for sale to customers in the ordinary course of a trade or business.” A dealer is barred from the IRC § 453 installment method and must report the entire gain in the year of sale; an investor may defer. The threshold tax question for a high-volume owner-finance operator. See dealer-vs-investor-453. Authority: IRC § 453(b)(2), (l); companion irc-453-installment-sale.

Deficiency

The shortfall a seller may pursue when a foreclosure sale of a defaulted contract yields less than the unpaid balance. Availability and limits vary sharply by state and by whether the deal is forfeited or foreclosed. See forfeiture-vs-foreclosure, strict-foreclosure-of-land-contract. Authority: —.

Dodd-Frank seller-financer exclusions

The federal carve-outs (the ≤1-property and ≤3-property / 12-month thresholds) that exempt small-volume seller-financers from full loan-originator and ability-to-repay obligations on a residential CFD. Exceeding the threshold pulls the operator into licensing/ATR exposure. See dodd-frank-seller-financing. Authority: Dodd-Frank Act (2010); CFPB Loan Originator Rule, 12 C.F.R. § 1026.36; ATR/QM Rule, 12 C.F.R. § 1026.43.

Due-on-sale clause

Also “acceleration on transfer” or “alienation clause.” A mortgage/deed-of-trust provision letting the lender, at its option, call the loan due on transfer of the property. Selling on a CFD or wrap can trigger it unless a Garn-St. Germain exemption applies. See due-on-sale-clause, garn-st-germain-due-on-sale. Authority: Garn-St. Germain Depository Institutions Act of 1982, 12 U.S.C. § 1701j-3.

E

Equitable conversion

The equity doctrine that, the moment a valid contract to sell land is signed, the buyer becomes the equitable owner while the seller keeps bare legal title in trust as security for the unpaid price — “equity regards as done that which ought to be done.” The mechanism that produces equitable title. See equitable-conversion. Authority: — (common-law doctrine; adoption and limits vary by jurisdiction).

Equitable title

The beneficial ownership interest the CFD buyer acquires on execution of the contract, while the seller retains bare legal title as security. It carries possession, the benefit and burden of value changes, and (in most states) an equity the buyer can defend against forfeiture. See equitable-title, equitable-conversion. Authority: —.

Equity of redemption

The defaulting buyer’s right, in a treat-as-mortgage state, to redeem the property by paying the balance before a foreclosure sale is complete — the hallmark that the deal must be foreclosed, not forfeited. See strict-foreclosure-of-land-contract, forfeiture-vs-foreclosure. Leading authority: sebastian-v-floyd-1979 (installment land contract treated as a mortgage).

Executory contract

A label with two distinct meanings that do not track each other: (1) in state CFD practice (esp. Texas), a contract where the deed is delivered only after full performance — the trigger for consumer-protection statutes; (2) in bankruptcy, a contract on which material performance remains due on both sides, governed by 11 U.S.C. § 365. Conflating them is a common, costly error. See executory-contract; bankruptcy treatment at bankruptcy-treatment-of-cfd. Authority: Texas Property Code §§ 5.061–5.085 (state sense); 11 U.S.C. § 365 (bankruptcy sense).

F

Forfeiture (strict forfeiture)

The seller’s remedy of declaring the contract terminated, keeping the property and every payment already made (often as “liquidated damages”), with the buyer left with nothing. The harshest pole of the remedy spectrum; increasingly limited by the substantial-equity rule. See forfeiture-vs-foreclosure, substantial-equity-doctrine. Leading authority: skendzel-v-marshall-1973 (forfeiture unenforceable against a buyer with substantial equity).

Forfeiture vs. foreclosure

The core remedy question: on default, does the seller get to forfeit (cancel and keep the property + payments) or must it foreclose the contract like a mortgage (judicial sale, surplus to the buyer)? Each state is classified strict_forfeiture | statutory_cancellation | treat_as_mortgage | hybrid. See forfeiture-vs-foreclosure. Anchor authorities: skendzel-v-marshall-1973; sebastian-v-floyd-1979.

G

Garn-St. Germain

The 1982 federal act that makes due-on-sale clauses enforceable, while carving out residential exemptions (e.g., certain intra-family transfers) that bear on whether a wrap or sub-to deal triggers acceleration. See garn-st-germain-due-on-sale. Authority: 12 U.S.C. § 1701j-3.

H

Homestead (equitable-owner question)

Whether a CFD buyer counts as an “owner” for (1) the homestead property-tax benefit and (2) the homestead exemption from creditors / forced sale. The buyer holds equitable title and possession; states split on whether that suffices. See homestead-and-equitable-owner. Authority: — (state-by-state).

Hybrid (remedy regime)

A state remedy classification in which forfeiture is available for some defaults or some buyers but converts to a foreclosure-like process (e.g., once substantial equity accrues). One of the four remedy_regime buckets. See forfeiture-vs-foreclosure, substantial-equity-doctrine.

I

Imputed interest

Interest the IRS treats as charged when a seller-financed contract states no interest or a below-AFR rate — recharacterizing part of each payment as interest regardless of the contract’s wording. See imputed-interest-afr. Authority: IRC §§ 483 & 1274.

Installment land contract

The umbrella term for the CFD family of instruments — a seller-financed sale where the seller retains legal title as security and the buyer pays the price in installments, taking a deed only at (substantial) payoff. See installment-land-contract.

Installment method (IRC § 453)

The tax election letting a seller defer gain and recognize it only as principal is collected over the contract term — unavailable to a dealer. See irc-453-installment-sale, dealer-vs-investor-453. Authority: IRC § 453.

L

Land contract

A common (esp. Midwestern) synonym for contract for deed / installment land contract. See installment-land-contract.

Lease-option / lease-purchase

A competing seller-finance structure: a tenancy plus a separate right to buy. A lease-option gives the occupant a non-binding option; a lease-purchase binds the occupant to buy and shades toward a disguised CFD. Courts may recharacterize a lease-option as a CFD (triggering forfeiture limits and disclosures). See lease-option-vs-contract-for-deed, rent-to-own-comparison. Authority: —.

Liquidated damages vs. penalty

The contract-law line that decides whether a “seller keeps all payments as liquidated damages” clause is enforced (a reasonable forecast of hard-to- estimate damages) or struck as an unenforceable penalty. The doctrinal engine behind many anti-forfeiture rulings. See liquidated-damages-vs-penalty. Authority: — (common-law two-part test; applied per jurisdiction).

M

Marketable title

Title a reasonable buyer would accept and a court would compel — free of reasonable doubt, undisclosed liens, and litigation hazard. The seller must be able and ready to convey it at payoff. A recorded-but-cancelled CFD clouds it until quieted. See marketable-title, quiet-title-after-cancellation. Authority: —.

Memorandum (of contract for deed)

A short recordable instrument that puts the buyer’s equitable interest in the public record (giving the world constructive notice) without recording the full contract terms. Recording the memorandum is the buyer’s chief priority protection and, in some states, a seller duty. See recording-and-priority. Authority: — (state recording acts and CFD-specific recording statutes).

Mortgage loan originator (MLO) licensing

The SAFE Act regime requiring licensing of those who, for compensation, take a residential mortgage-loan application or offer/negotiate terms — which can reach a high-volume seller-financer. See safe-act-mlo. Authority: SAFE Act; implemented through CFPB Reg. G/H and state MLO statutes (verify state thresholds).

N

Notice and cure

The two-step gate a seller must clear before default ripens into termination: serve a statutory notice of default/intent to forfeit (form, content, service, and recording dictated by statute), then allow the cure period to run. See notice-and-cure, reinstatement-right. Authority: — (each state’s cancellation statute sets the form and clock).

Novation

A new tri-party agreement that substitutes one contracting party for another and releases the original — distinct from an assignment, which does not release. See novation-and-assignment. Authority: —.

Q

Quiet-title (after cancellation)

The action a seller brings to remove of record the buyer’s recorded CFD interest after a default termination, restoring marketable title. Until quieted, the recorded interest is a cloud a title company will except to. See quiet-title-after-cancellation. Authority: —.

R

Race / notice / race-notice

The three flavors of state recording act that decide priority between competing interests in the same parcel (the buyer’s CFD vs. a later mortgage, lien, or second sale). See recording-and-priority. Authority: — (each state’s recording act).

Recording & priority

Recording gives the world constructive notice of the buyer’s equitable interest; priority decides which conflicting interest wins. Governed by the state recording act plus any CFD-specific recording statute. See recording-and-priority. Authority: —.

Reinstatement right (right to cure)

The buyer’s statutory or equitable ability to stop a forfeiture/cancellation by paying the arrears (plus costs/fees where required) before termination becomes final — restoring the contract. Runs on short statutory clocks. See reinstatement-right, notice-and-cure. Authority: — (state-specific cure windows).

Rent-to-own

Umbrella label for (1) a lease-option (true tenancy + optional purchase) and (2) a lease-purchase (tenancy + binding obligation to buy, often recharacterized as a CFD). See rent-to-own-comparison, lease-option-vs-contract-for-deed. Authority: —.

Risk of loss

Who bears casualty loss (fire, flood, condemnation) after the contract is signed but before the deed is delivered. The equitable-conversion rule puts it on the buyer-as-equitable-owner; some states (and the Uniform Vendor and Purchaser Risk Act) shift it. See risk-of-loss, equitable-conversion. Authority: — (UVPRA adopted in some states; verify per jurisdiction).

S

SAFE Act

The Secure and Fair Enforcement for Mortgage Licensing Act — the basis for MLO licensing that can reach a seller-financer. See safe-act-mlo. Authority: SAFE Act (verify implementing rule and state thresholds).

Seller carryback (seller / owner financing)

The umbrella for any arrangement where the seller extends the purchase credit instead of a bank — covering purchase-money mortgages/deeds of trust, CFDs, lease-purchases, and wraps, which allocate title and remedies very differently. See seller-carryback-financing. Synonyms: owner financing, purchase-money sale. Authority: —.

Statute of frauds

The rule that a contract for the sale of land (including a CFD) must be in writing and signed to be enforceable. See statute-of-frauds-real-property. Authority: — (each state’s statute of frauds; common-law origin).

Statutory cancellation

Also statutory forfeiture, forfeiture-by-notice. A legislatively prescribed procedure letting the seller terminate on default without a foreclosure suit — but only by following the statute’s exact notice form, service, and cure deadline. One of the four remedy_regime classifications. See statutory-cancellation, forfeiture-vs-foreclosure. Authority: — (the governing statute is state-specific; e.g., Minnesota and others — see the jurisdiction page).

Strict foreclosure of a land contract

The treat-as-mortgage pole: states where a defaulted CFD cannot be forfeited and must be foreclosed like a mortgage, the buyer keeping an equity of redemption and a claim to sale surplus. (Note: “strict foreclosure” is also used narrowly for a no-sale decree in a few states.) See strict-foreclosure-of-land-contract, forfeiture-vs-foreclosure. Leading authority: sebastian-v-floyd-1979.

Subject-to (“sub-to”)

A purchase where the buyer takes possession/equitable ownership while the seller’s existing mortgage stays in place and in the seller’s name, unpaid and not formally assumed — the buyer takes subject to the lien. Carries due-on-sale and underlying-loan risk. See subject-to-financing, underlying-mortgage-wrap, due-on-sale-clause. Authority: —.

Substantial-equity doctrine (substantial-equity bar)

The rule — anchored in skendzel-v-marshall-1973 — that a forfeiture clause becomes unenforceable once the buyer has built “substantial equity,” at which point the seller must foreclose rather than forfeit. The national engine of the drift away from strict forfeiture. See substantial-equity-doctrine, forfeiture-vs-foreclosure. Leading authority: Skendzel v. Marshall, 301 N.E.2d 641 (Ind. 1973) — skendzel-v-marshall-1973.

T

Treat-as-mortgage

The remedy_regime classification for states that treat a defaulted CFD as a mortgage — forfeiture barred, foreclosure required. See strict-foreclosure-of-land-contract, forfeiture-vs-foreclosure. Leading authority: sebastian-v-floyd-1979.

Truth in Lending (TILA / Reg Z)

The federal disclosure regime that can apply to a residential seller-financed CFD extended to a consumer — driving finance-charge, APR, and balloon disclosures. See truth-in-lending-cfd. Authority: TILA; Regulation Z, 12 C.F.R. part 1026 (see § 1026.43 ATR/QM, § 1026.36 LO rule).

U

Underlying-mortgage risk

The danger that a seller’s still-outstanding senior loan (left in place on a wrap or sub-to CFD) is accelerated, defaulted on, or foreclosed — wiping out the buyer’s junior equitable interest. See underlying-mortgage-wrap, wrap-around-mortgage, subject-to-financing. Authority: —.

Usury / interest caps

The state limits on interest a lender may charge on a “loan or forbearance.” The threshold CFD question is whether the carried price is a “loan or forbearance” that the usury cap reaches at all; consequences range from forfeited interest to criminal exposure. See usury-and-interest-caps. Authority: — (each state’s general rate, contract ceiling, and criminal-usury threshold).

W

Wrap-around (wrap)

A seller-financed sale — usually a CFD, sometimes an AITD or wrap note — in which the seller’s existing underlying mortgage is left in place and “wrapped.” The buyer makes one blended payment on the full wrap balance, and the seller continues to service the senior loan, profiting on the rate spread. Carries due-on-sale and underlying-mortgage risk. See wrap-around-mortgage, underlying-mortgage-wrap, due-on-sale-clause. Authority: Garn-St. Germain due-on-sale overlay, 12 U.S.C. § 1701j-3.

▸ For Sellers / Operators. The compliance-critical terms here are statutory cancellation / notice and cure (does your state let you cancel by notice, and exactly how?), the substantial-equity bar (whether a paid-down buyer can defeat forfeiture and force a foreclosure), the Dodd-Frank thresholds and SAFE Act MLO exposure, due-on-sale under Garn-St. Germain on any wrap or sub-to deal, and memorandum recording. Each links to the page that states the governing rule for your jurisdiction.

▸ For Buyers. Pay closest attention to equitable title, the reinstatement / right to cure, and the substantial-equity doctrine — the three doctrines that most often determine whether a missed payment costs you the home or merely the arrears.

Disclaimer. This page provides legal information, not legal advice, and does not create an attorney-client relationship. Contract-for-deed law varies by jurisdiction and is frequently amended; definitions here are summaries of the linked pages, which carry the controlling citations. Verify every term against the cited primary source and your state’s jurisdiction page, and consult a licensed attorney in the relevant jurisdiction before acting. Last verified: 2026-06-08.

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